McDonald’s Corporation operates a global quick‑service restaurant and franchising business and combines high profitability with strong cash generation (net margin ~31.9% and operating cash flow TTM $10.55B).
The company’s margin profile and cash flow are clear strengths: net profit margin sits around 31.9% (most recent quarter), gross margin was 53.4% (latest available) and operating margin 43.0% in the comparable dataset, supporting durable profitability (Profit Margin Trends).
Earnings have compounded at the top end of peers over the medium term, with a 12.60% 5‑year diluted EPS CAGR and an 11.50% 3‑year EPS CAGR, while revenue per share has grown at roughly 6.96% over five years, showing multi‑year growth momentum (Revenue & EPS Growth; EPS Diluted & Revenue per Share).
Cash quality is robust: operating cash flow TTM of $10.55B exceeds trailing net income of $8.56B, free cash flow margin is about 26.73%, and the cash conversion ratio is 1.1545, indicating consistent conversion of earnings into cash (Earnings Quality Analysis; Strategic Capital Allocation).
Areas of concern include liquidity and capital structure. The most recent current ratio is below 1.0 at 0.9546, which points to tighter short‑term liquidity, and reported debt‑to‑equity is very high at 22.3188, implying a capital structure that warrants monitoring given its magnitude.
Near‑term growth has also moderated versus historical peaks: one‑year EPS growth was 4.1% and one‑year revenue‑per‑share growth 3.7% in the latest period, contrasting with the stronger multi‑year EPS CAGR noted above—an indication that recent momentum is tempered (Revenue & Net Income; EPS Diluted & Revenue per Share; Return on Equity (ROE)).
Reported return on equity has swung to an elevated level of 478.1% in the latest TTM, a pattern that typically reflects a shrinking equity base or significant buybacks and merits scrutiny for sustainability.
The foundation of business quality and long-term value creation
In 2025, MCDONALD'S CORP's top line climbed through the first three quarters—$5.96B in Q1, $6.84B in Q2, and $7.08B in Q3—before a modest decline to $7.01B in Q4. Net income followed a similar intra-year pattern, rising from $1.87B in Q1 to $2.25B in Q2 and $2.28B in Q3, then easing to $2.16B in Q4. Recent quarters therefore show sequential improvement into mid‑year with a slight pullback in the latest quarter.
Viewed across the full series, both revenue and net income recovered from the pronounced trough in 2020 Q2—revenue $3.76B; net income $483.8M—and have generally trended higher, with recurring stronger results in third quarters (for example, 2023 Q3 revenue $6.69B / net income $2.32B and 2024 Q3 revenue $6.87B / net income $2.25B). The most recent quarterly revenue was $7.01B and the most recent quarterly net income was $2.16B.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Jan 2025 to Dec 2025, Mcdonalds Corp generates $26.89B in revenue. After accounting for taxes and expenses, the company retains 31.9% as net profit margin, resulting in $8.56B in net earnings from $26.89B in revenue.
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Dec 2025
Analyzing long-term margin stability and competitive positioning
MCDONALDS CORP’s net profit margin has been concentrated in the low-30% range over the most recent quarters. After a peak around 33.4% in the quarter ended 2024-03-31, the net margin trended slightly lower into late 2024 (31.7%) and remained roughly stable through 2025 with a modest bounce to 32.2% in 2025-06-30 before settling at 31.9% in the most recent quarter. The most pronounced inflection in the recent series was the decline from the ~33% level in early 2024 to the ~31.7–32.3% band that followed.
Gross and operating margin datapoints in the dataset are older and less frequent than the net margin series. The latest available gross margin observation in the provided data is 53.4% (2019-06-30) and the latest operating margin observation is 43.0% (2019-06-30). The most recent observed values are: Net Profit Margin 31.9% (2025-12-31); Gross Margin 53.4% (2019-06-30); Operating Margin 43.0% (2019-06-30).
Understanding Profit Margins
Between Jan 2025 and Dec 2025, Mcdonalds Corp converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
Over the past several years both reported net income (TTM) and operating cash flow (TTM) for MCDONALDS CORP have trended upward, with operating cash flow consistently exceeding net income. In the most recent year operating cash flow rose from about $9.45B at 2024-12 to $10.55B at 2025-12, while trailing twelve‑month net income moved more modestly from $8.22B to $8.56B. The most recent quarters show a clear pickup in operating cash flow relative to net income, increasing the cash-to-earnings cushion.
A notable inflection occurred in 2023 when both metrics climbed from the $7–8B range into the $9B area (operating cash flow rising from $7.39B at 2022-12 to roughly $9.61B by 2023-12 and net income from $6.18B to $8.47B over the same span). Since then operating cash flow has been slightly more volatile but generally higher, widening the gap versus net income to roughly $1.99B in the latest TTM. The most recent Net Income (TTM) was $8.56B. The most recent Operating Cash Flow (TTM) was $10.55B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
MCDONALDS CORP's trailing twelve-month return on equity has accelerated sharply over the last year. After a level of 159.3% at 2024-09-30 it rose to 216.6% (2024-12-31), 236.3% (2025-03-31), 304.1% (2025-06-30), 389.1% (2025-09-30) and reached 478.1% by 2025-12-31, showing a consecutive six-quarter increase and a large upward inflection beginning in late 2024. Prior to this run, ROE rebounded from a deep trough of 14.2% at 2021-12-31 back into triple-digit territory through 2022–2024.
Across the longer history, ROE for MCDONALDS CORP has varied substantially — generally in the 30–40% range through the early 2010s, with intermittent large spikes (for example 735.5% at 2016-06-30). The most recent observed return on equity was 478.1%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
Over the last several quarters MCDONALD'S CORP's trailing twelve-month operating cash flow has trended higher, rising from the mid–$9B range in 2024 to just above $10.5B by year–end 2025. The most recent readings show a steady upward drift: $9.45B at 2024–12–31, $10.49B at 2025–09–30 and $10.55B at 2025–12–31, with the latest value remaining the largest in the series.
Investing cash flow became more negative through 2024 (reaching −$5.35B at 2024–12–31) before moderating to roughly −$3.6B–$3.8B through 2025. Financing cash flow has been consistently negative, with outflows varying quarter to quarter; notable peaks include −$7.50B at 2024–12–31 and a recent increase to −$7.12B at 2025–12–31 after mid–2025 quarters around −$5B to −$5.8B. The most recent trailing–12–month values are: Operating Cash Flow TTM $10.55B, Investing Cash Flow TTM −$3.82B, and Financing Cash Flow TTM −$7.12B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
The Price-to-Earnings ratio for MCDONALDS CORP is flat across the entire series shown: every quarterly observation from the earliest reported period through 2025-12-31 is recorded as 0.0x. There are no visible movements, spikes, or troughs in the P/E series; the chart shows a constant level at 0.0x for each quarter.
This pattern holds for the most recent quarters (2025-12-31, 2025-09-30, 2025-06-30, 2025-03-31) as well as earlier periods, so there are no recent inflection points to report and the current level remains unchanged. The most recent quarterly P/E ratio was 0.0x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.